Cloud platforms: OpenStack in its fourth year

Oracle has eventually joined the OpenStack community this month. By integrating the open source cloud management platform with its own products Oracle says it is reflecting its customers’ need for standards to support flexible application deployment across both their in-house and public cloud infrastructure.

Quocirca first wrote about OpenStack when Rackspace announced it in July 2010 (see Rackspace reaches for the stars). Whilst welcoming the initiative, Quocirca hedged its bets, concluding:

“OpenStack is an interesting and welcome initiative. If Rackspace and its friends manage it right they may establish a de facto standard for managing hosting environments. Get it wrong and Rackspace may in effect be just building its own proprietary alternative to the growing range of cloud architectures.”

So, did Rackspace get it right? The number of organisations that have joined the OpenStack community is impressive; it includes sellers of OpenStack-based infrastructure-as-a-service (IaaS), providers that use OpenStack to underpin other services, integrators that deploy private clouds based on OpenStack and commercial distributions of OpenStack variants. So, OpenStack has certainly not turned out to be a Rackspace proprietary offering.

The list of supporting organisations reads like an IT industry roll call (with some obvious exceptions; including Amazon, Google and Microsoft - all with their own cloud agendas). The eight highest level ‘Platinum’ sponsors (fee $500K/annum) include Rackspace itself, IBM, HP and AT&T, plus the major open source distributors Red Hat, SUSE and Canonical. The final one is Nebula, a provider of private cloud appliances, private cloud being an important part of the OpenStack story.

Then there are 20 or so ‘Gold’ level sponsors (fee $50–200K$/annum) including Dell, Cisco, Huawei, Juniper, VMware and NetApp. Oracle joined around 50 ‘Corporate’ sponsors (fee $10–25K/annum) including Avaya, EMC and F5. There are a further 200+ ‘Supporting’ organisations, working with OpenStack at some level, that are not financial sponsors.

So, the project is generating around $7M to $10M in sponsorship. This is all well and good, but what does this translate to in terms of market share and industry revenues? And how does this compare to Amazon Web Services (AWS), the 800LB gorilla of public cloud?

There are a number of problems in trying to make such comparisons. First, whilst the success of AWS is evident; Amazon Inc. does not break out AWS revenues. Second, measuring the revenue generated by an open source community, such as OpenStack, is tricky; OpenStack can be deployed for free without paying a distributor for support. So it is necessary to try and measure value derived from OpenStack, rather than just the revenues generate through selling it. Third, even if both sets of figures were transparent and absolute, it is not a like for like comparison as OpenStack is used for both public and private infrastructure; AWS is only a public platform (Amazon Virtual Private Cloud/VPC is based on its own infrastructure); AWS might say that only public cloud deployments based on OpenStack are valid for comparison.

Rackspace itself says it generated about $400K of revenue from its own OpenStack-based infrastructure-as-a-service (IaaS) platform in the twelve months to Sept 2013. On top of this should be added the value derived by its customers through OpenStack-based private and hybrid cloud deployments. The 451 Group estimates that 70% of overall OpenStack revenue is still generated by Rackspace (which does not take into account value derived from free use). The 451 Group’s estimate that OpenStack associated revenue will exceed $1B by 2015 seems reasonable, perhaps conservative.

Amazon Inc. includes all revenues from AWS under ‘other’ category on its balance sheets. InformationWeek reported back in Sept 2013 that analysts from Technology Business Research (TBR) had estimated, based on 2013 quarterly earnings releases, that AWS was on track for $1B revenue in calendar Q4 of 2013 so, given growth rates of over 100%, well in excess of $5B per annum in 2014 seems more than probable. All this before you started looking at the revenues of partners such as Eucalyptus that provides an AWS compatible private cloud platform.

Of course, OpenStack and AWS are not the only shows in town. Microsoft does not break out revenues for its Azure platform, but has claimed figures of $1B according to the Business Insider. Then there is Google, again figures are not broken out, but TBR estimates suggested Google’s overall cloud computing sales are on course for $1B/annum, of which its Cloud Platform offerings would be about a fifth—Google should not be underestimated as it has the scale and reach to take on AWS.

There are other open source offerings too. Apache’s Cloudstack (supported by Citrix), OpenNebula, which provides management support across various public and private cloud platforms and VMware’s CloudFoundry supported by VMware and EMC (both are also OpenStack supporters) is an open source platform based on VMware. However, the VMware cloud story is much broader than this, as the bulk of VMware cloud deployments will be based on its commercial offering vCloud Director. vCloud includes both private and public deployments. Furthermore, many VMware virtualisation projects will be morphing into private clouds, making it a huge player.

Measured across its community OpenStack is a worthy contender, but has by no means established a clear lead. The agenda setter, for public cloud at least, is and looks likely to remain, AWS, not least when it comes to price; in its own words:

“The DNA of AWS is very different than old world technology vendors. We are very comfortable running high volume/low margin businesses. That means that as we scale and become even more efficient and cut our own cost, we can continue to drive cost down for our customers. AWS has lowered prices 38 times since launching our first service in March of 2006. In 2013 alone we lowered prices 11 times.”

The effect of AWS both through direct provision of its services and through the impact it has the cloud market will be decisive.

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